Thursday, July 07, 2005

Bill Gross's Latest Doom and Gloom

Of note this week, Bill Gross' latest missive, that starts with a Billy Joel quote just to keep things interesting. I'd say this is a must read for those investors who like to consider economic theory as icing to a practitioner's cake. He argues that the asset-backed economic expansion will shortly run out of gas due to the floor of real rates at zero, with the likelihood for deflation growing. Any sane observer of housing prices could only consider that the probability for a down move as better than 50/50, but every magazine still says there is a bubble, so I figure the housing bull still has legs. Even so, I am a renter.

And, if you didn't see it, a great article about the latest trends in indexation, towards accounting based index compilation techniques (rather than market cap). Since 'beta' exposure has gotten so cheap (10bps at FIDO to retail punters!) and alpha is all the rage (hedge funds at every corner), then we need a new and improved 'beta' or average. Here is the new & improved model. The NY Times had a good article about it too, here.

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